Huchem invests big in Borneo chemical plant

Huchem, an affiliate of Taekwang Group, announced Wednesday that it is investing 1 trillion won ($864 billion) to build a chemical production plant in Sarawak, Malaysia.

The Korean fine chemical manufacturer held a groundbreaking ceremony in Bintulu Sarawak, located on the northern coast of Borneo. The plant will cover roughly 3.3 million square meters (1.2 square miles) and be able to produce 600,000 tons of ammonia, 400,000 tons of nitric acid and 200,000 tons of ammonium nitrate annually.

Huchem said it plans to eventually increase its production of ammonia to 1 million tons per year. Commercial production will likely start as early as the first half of 2019.

Korean companies have been giving up on producing ammonia, a key substance in the fine chemical industry, since the 2000s largely due to increasing competitiveness in the global market. In recent years, Korean companies have been importing roughly 1.4 million tons of ammonia annually from countries such as Indonesia, Australia and the Middle East. Once the plant is complete, Huchems will be the only Korean company that manufactures ammonia.

The company will invest 250 billion won out of pocket in the construction, with the remaining 750 billion won coming from investors and loans from financial companies.

If the production plant goes as planned, 70 percent of the ammonia currently imported to Korea will be replaced by that produced in the Sarawak plant. Huchems estimates this will help Korean companies save as much as 500 billion won on import spending annually. The ammonia production will also raise the price competitiveness of its other chemical products including polyurethane and nitric acid, which use ammonia as their basis. The company predicts this will positively influence other Korean industries including automotive, electronics and fertilizer.

Huchem also plans to build other factories near the Malaysia plant to make polyurethane and synthetic fibers that use ammonia in their production. The Korean company has already secured 495,000 square meters of additional land.

“Once we enter the second phase of our business, it will be possible to secure a production system where the chemicals manufactured from the chemical plants will lead to product production,” said a public relations officer at Huchem.

The development of the chemical production plant in Sarawak is the result of the overlapping interests of the Korean company and the local government.

Sarawak is rich in natural gas, which is the key ingredient used in Huchem’s businesses. Additionally, the local government’s tax benefit policies to attract foreign investments also played a key role in Huchem’s decision to locate itself there.

The chemical plant is expected to benefit the local economy by hiring Sarawak residents and turning the area into a base for manufacturing.

The groundbreaking ceremony was attended by the 70 year-old chairman of Taekwang Group, Park Yeon-cha; Huchem CEO Choi Gyu-sung; Sarawak Governor Adenan Satem; Azman Mahmud, the CEO of the Malaysian Investment Development Authority; and 2,000 local residents.

BY LEE SOO-KI [lee.hojeong@joongang.co.kr]